The 2013 State Budget brings massive tax hikes
It’s a pity that we have to start the week talking about massive tax hikes, but this is major news for the country and it will affect the Algarve of course, so we have to talk about it.
The 2013 State budget is the harshest in recorded history, never before in the history of Portuguese democracy have taxes been raised to high, the government taking austerity measures to their limit in a move that has had many economy experts describe it as being ‘violent’, ‘unworkable’ and ‘destructive’.
This view has been very well reflected by the people who have engaged in several protests in recent weeks, against the extreme austerity measures, and what makes it more compelling is that people from all walks of life took place in these protests.
Obviously the capital, Lisbon, has been the center-point of most demonstrations, so much so that it has been called ‘The Capital of Protest’, thousands of people gathering outside the Parliament building when the new budget was handed over to be ratified – the people were asking for the government’s resignation by the way.
The current protests don’t seem to do much since the country’s Prime Minister Pedro Passos Coelho says that the budget is “harsh but fair”, stressing the issue that it is necessary in order to reduce the public deficit to 4.5% of GDP by next year.
The budget is meant to generate 5.3 billion Euro in revenue, however about two-thirds of that amount will come from higher taxes with only one-third coming from spending cuts.
Here’s a quick look at only some of the more important measure included in the 2013 budget:
- Fuel will be more expensive, with the tax on petroleum product increasing by 0.1 cents per litre of petrol and 0.2 cents per litre of diesel;
- The tax deduction on mortgages will be limited to 15% of bank interest up to 296 million Euro, half the maximum allowed this year;
- There will be a 4% surtax, levied on all workers. This tax will be deducted from all workers’ salaries each month for no real reason;
- Tax brackets will be reduced from eight to five, which directly translates in an increase of monthly bills, so disposable income will suffer a severe decrease.
All of these tax hikes are of course expected to affect the tourism in the Algarve to a large degree, and considering that most of the revenue from the region is based on tourism, all industries in the region, including Algarve car hire services and accommodations and the like, are watching the proceedings with much care.
There are quite a few more changes to the budget but only the ones that we mentioned spell a pretty dire future, we can only keep an eye on the situation and report it back to you.
